How to deal with unreliable suppliers

Whether you’re a buyer for a retailer, a wholesaler or a manufacturer, it’s likely that you’ll end up dealing with unreliable suppliers at some point in your career.

Research conducted by the Aberdeen Group found that 80% of supply management executives reported that their companies experienced disruptions within the past two years serious enough to negatively impact their companies’ customer relations, earnings, time-to-market cycles, sales, and overall brand perceptions. 

Unreliable suppliers can leave you with late, incorrect or short deliveries. Your company may suffer from production being slowed or even stopped altogether. If you’re in retail, you could end up with stock outs, which will negatively impact customers.

So, what do you do when you’re faced with unreliable suppliers? Here are four solutions that can help you to overcome the challenges created by poor suppliers:

 

1. COMMUNICATE

Take the time to speak with your supplier, whether it’s face-to-face, over the phone or by email. Establish your needs and requirements as a customer, and to understand your supplier’s needs too. This will show your dedication to building a mutually beneficial relationship, and go a long way towards improving your SRM. (link to article – keep your customers close and suppliers closer)

It is inevitable that all suppliers will fall short of your expectations in their quality or service at some point. Mistakes always happen, even with the best systems in place. It is important to be fair with your suppliers and give them a chance to resolve any issues you may experience. The key indicator as to the quality of your suppliers is in how they deal with a problem.

As a procurement professional, it’s your responsibility to be firm and ask your supplier to explain the root cause of the issue and what corrective actions they will be taking to avoid re-occurrence. If you are satisfied with their response, it’s worth giving them another chance. However, if what they say doesn’t sit quite right with you, you may find that point 4 below gives a more appropriate solution to your unreliable supplier problem.

PROS:

Helps to foster a more transparent, mutually beneficial relationship with your suppliers.

CONS:

Can be time-consuming and may not always result in a quick-fix to issues.

 

2. CREATE A SERVICE LEVEL AGREEMENT (SLA)

signing-sla-contract

An SLA is the part of a contract that defines what services a service provider will provide and the required level or standard for those services. They’re intended to show a supplier what is important to your company and to be used as a tool to measure their success.

You can outline anything that matters to your business, including financial performance (e.g. budgets, year over year improvements) and responsiveness (e.g. time to respond, time to resolve), to mention a couple. Check out a great guide to what SLAs can achieve and how to create one here.

PROS:

Clearly outlined requirements and procedures that have been agreed on by both parties will greatly improve the time it takes to resolve difficulties. Generally, the level of customer service will be improved and the suppliers will be more accountable.

CONS:

These documents can be quite time-consuming to draft. They require a deep understanding of one another and each party’s needs and abilities. As a customer, it’s important that you take the responsibility of drafting a fair agreement, at risk of receiving a complex proposal that doesn’t fully cover your expectations.

 

3. FIND A BACK UP SUPPLIER

We’ve all heard the saying: ‘Don’t put all your eggs in one basket’. The same principle applies to your suppliers too. Having a backup supplier that is ready to go when you need them helps you to avoid being caught short.

It’s important to research potential suppliers well to make sure they meet your business’ requirements beforehand. Once you’ve established your secondary supplier, aim to keep the relationship warm by purchasing a certain percentage of your products from them. This will both maintain a positive relationship, and help you to gauge whether they can deliver timely and efficient service.

PROS:

You don’t have to worry about any gaps in your supply chain when you have a backup supplier in place. You may even find they offer better pricing or service than your primary supplier.

CONS:

It can be time-consuming to find suppliers that can offer exactly what you need. Some suppliers may not be happy with being a secondary suppliers and may choose to impose minimum order values/frequencies, which can make the process difficult.

 

4. SWITCH TO A NEW SUPPLIER

business-meeting

If a vendor has been consistently unreliable, they can leave you with no other choice than to move on to a new supplier. Make sure you’re certain that you’ve exhausted all other options and that this is the best decision for your business’ future success.

Avoid kicking up a fuss and burning bridges, though. Quietly move on and see if the supplier notices. It’s always worth keeping supplier relationships civil, because there is always the chance that they will improve in the future.

PROS:

By thoroughly researching and vetting new suppliers, you can ensure that the new vendor meets your requirements and has better customer satisfaction than your current one.

CONS:

This process can be time-consuming and difficult. It can be tough to ensure that the quality of the product or service you’re sourcing is adequate.

 

We hope you find this information useful in dealing with your unreliable suppliers. Let us know your thoughts and any suggestions you may have in the comments below.

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